Analysts hold on to Facebook optimism amid privacy probe over misuse of data
NEW YORK The Federal Trade Commission is investigating Facebook’s privacy practices following a week of scandals including allegations a Trump-affiliated political consulting firm got data inappropriately from millions of Facebook users.
Facebook’s stock, which took a big hit last week, plunged as a result before recovering later in the day.
The social media giant is heading toward its worst month in more than five years after an analyst report warned of a temporary pullback in advertising and the FTC confirmed it’s investigation.
The shares fell as much as 6.5 per cent Monday in New York, bucking the broader positive direction of the markets and putting them on course for the worst month since August 2012. Facebook has lost about US$100 billion in market value in the past 10 days.
Colin Sebastian, an analyst at Robert W. Baird & Co., wrote that the firm’s latest social media survey indicates “some moderation in Facebook usage,” and notes potential for brands and small and medium-sized businesses to “pause some Facebook campaigns until headlines subside.” He lowered his price target to US$210 from US$225 while saying shares remain attractive for investors with medium to long-term time horizons.
Even as some advertisers temporarily pull back on Facebook spending, Sebastian said he expects the move to be short lived “as there are few channels available that can match Facebook’s return on ad spend.”
And, Facebook has other things going for it, such as Instagram, some analysts noted. “As an offset, Instagram’s growth becomes key,” Bloomberg Intelligence analyst Jitendra Waral wrote in a note.
Despite the stock drop — about 20 per cent in the last week — and increase in regulatory scrutiny, Facebook still has 44 buy ratings and only two sell ratings.
Facebook chief executive Mark Zuckerberg is facing one of his worst crises in public confidence yet after reports that Cambridge Analytica improperly obtained and then retained data from 50 million Americans.
Tom Pahl, acting director of the FTC’s Bureau of Consumer Protection, said its probe would include whether Facebook engaged in “unfair acts” that cause “substantial injury” to consumers.
Facebook is also facing questions over reports that it had collected years of contact names, telephone numbers, call lengths and information about text messages from Android users.
Facebook said in a statement on Monday that it remains “strongly committed” to protecting people’s information and that it welcomes the opportunity to answer the FTC’s questions. News outlets reported on the FTC investigation last week, but the FTC hadn’t confirmed it until Monday. Facebook reached a deal with the FTC in 2011 offering privacy assurances.
Facebook said Sunday that this data is uploaded to secure servers and comes only from people who gave explicit consent to allow it. Officials say the data is not sold or shared with users’ friends or outside apps. They say the data is used “to improve people’s experience across Facebook” by helping to connect with others. But the firm did not explain exactly what it used the data for or why it needed it.
Although Zuckerberg talked about changes in 2014 that would have prevented a data breach, Marc Rotenberg, executive director of the Electronic Privacy Information Center, believes Facebook violated the 2011 FTC settlement in letting Cambridge Analytica harvest data, and the FTC should have stopped it.
Nearly three-quarters of Canadian Facebook users say they will make at least some change to how they use the platform in the wake of the scandal.
A survey by Angus Reid Institute suggests 73 per cent of Canadian Facebook users say they will make changes, while 27 per cent say it will be “business as usual.”
The survey also found that one in 10 say they plan to abandon the platform, at least temporarily.
The Angus Reid Institute conducted two online surveys, the first involving 1,501 adults between Feb. 28 and March 2 and the second including 1,509 adults from March 21 to 22.